200k investment requirement for extension

[anna2009]

Dear all,

I'd like to hear about your experience on spending 200k.
Assuming that my business requires an initial outlay of 50k, then every month I'm going to spend 5k on rent, utilities, wages, etc. The total amount would be 50 + 5*36 = 230k. Would this consider as a pass on spending 200k?

Of course, the business might make some revenues and profit. But all profit will be withdrawn from the business account as distribution to owner. Is this fine?

Thank you very much for all experts who attend on my question.

Best,
anna09

[marcnath]

Why are you focused on spending ?
The T1E 200K route requires you to invest 200K - i.e put in cash money of 200K into your business. How you spend it depends on what the business needs. As long as you don't use that money to pay yourself or buy residential property, it should be fine.

[anna2009]

Thanks marcnath for your advice. I just worry if it requires an initial investment of 200k, meaning that I might need to run 4 similar businesses at the same time to meet the requirement. Because if my above plan (50k intial investment, 5k monthly expense) works, I would actually need not to use all 200k cash I prepare as cash will come back from the business. I am still feel very confused. Could others please clarify if this case is acceptable?

Many thanks to all.
anna09

[Saeedjansaeed]

Utilities, wages rent etc are your exanses not investment.
Investment is anything which goes from your personal account to your business account, afterwards can be changed into tengible and intengible assets..
Hope this helps

[Saeedjansaeed]

Expanses...

[marcnath]

Thanks marcnath for your advice. I just worry if it requires an initial investment of 200k, meaning that I might need to run 4 similar businesses at the same time to meet the requirement. Because if my above plan (50k intial investment, 5k monthly expense) works, I would actually need not to use all 200k cash I prepare as cash will come back from the business. I am still feel very confused. Could others please clarify if this case is acceptable?

Many thanks to all.
anna09

There is no requirement for the 200K to be all invested initially, you can invest it as and even needed, even 5K per month if you want to.
But you can't use cash generated from the business to count towards the investment. The rules are very clear that you need to be investing 200K of your own money into the business during the initial period of grant.
Also note that the condition of your grant is that the 200K that you show initially remains available to you all the time until you transfer it into your business.

[anna2009]

Thanks marcnath and Saeedjansaeed.

I understand the difference between investment and expenses in terms of accounting, but still think that the HO approach is much different. And that what makes me confused.

I will make 200k available to the business either in form of capital contribution or unsecured DL at the beginning. So the 'invested' requirement is satisfied, but how about 'spent' requirement. With the business model I mentioned, only 50k is used to acquire the firms' assets , 5k each month are expenses like Saeedjansaeed said, will these 5k every month be considered as spent on the business by the HO?

And also, in this case, can cash generated from the company be used to pay for director remuneration package? I

I am going to apply for this type of visa when my understanding about this is clearer. Hope to hear more from you all.

[bizman]

Thanks marcnath and Saeedjansaeed.

I understand the difference between investment and expenses in terms of accounting, but still think that the HO approach is much different. And that what makes me confused.

I will make 200k available to the business either in form of capital contribution or unsecured DL at the beginning. So the 'invested' requirement is satisfied, but how about 'spent' requirement. With the business model I mentioned, only 50k is used to acquire the firms' assets , 5k each month are expenses like Saeedjansaeed said, will these 5k every month be considered as spent on the business by the HO?

And also, in this case, can cash generated from the company be used to pay for director remuneration package? I

I am going to apply for this type of visa when my understanding about this is clearer. Hope to hear more from you all.

The HO is trying to work with that concept to forestall abuse of the visa route. All you need do is invest your money either as share capital or DL. Run your business normaly, a good business will definitely grow and growth requires capital. Just ensure you keep all records of every transaction that pass through your business account. Either income or expenses. Follow the requirement of the Tier 1 route, employ the required staff, minimum of two, keep adequate records for them. Look for a good accountant (certified chartered) from the begining etc and you should be fine.

[marcnath]

I understand the difference between investment and expenses in terms of accounting, but still think that the HO approach is much different. And that what makes me confused.

No, the HO approach is not very different. I agree there are a couple of places where it confusing.
1) Money spent can be considered as investment - this is primarily money that you spend in setting up the business and before you have a bank account into which you transfer the money into. HO allows those expenses that you personally spent to be considered investment.
2) Somewhere it also says that money has to be spent and leaving it in the bank is not considered investment (or words to that effect). That is, as @bizman said, mainly to prevent someone just putting in the money and not doing serious business. They would not be very strict about that in a genuine business.

I will make 200k available to the business either in form of capital contribution or unsecured DL at the beginning. So the 'invested' requirement is satisfied, but how about 'spent' requirement. With the business model I mentioned, only 50k is used to acquire the firms' assets , 5k each month are expenses like Saeedjansaeed said, will these 5k every month be considered as spent on the business by the HO?

Refer to the above - there is no strict requirement on spend

And also, in this case, can cash generated from the company be used to pay for director remuneration package?

Yes, that is possible

[anna2009]

Thank you all, especially 'marcnath', for being patient on answering my queries. I think I understand the requirement now.

All the best and thanks for this very helpful platform.

anna09